Most Interesting 2020: McLaughlin, Defining a State-Owned Enterprise in International Investment Agreements

The tenth in our series "Most Interesting 2020" (the cover date is 2019, but the article was published in 2020):

Mark McLaughlin, Defining a State-Owned Enterprise in International Investment Agreements (ICSID Review - Foreign Investment Law Journal, Vol. 34, no. 3, pp. 595–625, Fall 2019)

Despite the growing presence of state capitalism in the global economy, a unified definition of a state-owned enterprises (SOE) continues to elude regulators and academics. McLaughlin has made a well-reasoned attempt to establish a five-criteria framework by which States can distinguish SOEs from private investors, as well as other forms of sovereign investments. The value of the contribution is in recognizing that defining SOEs is an issue of great complexity due to the difficulty in neatly expressing their characteristics in terms of the orthodox dichotomy between the private interests of foreign investors and the public interests of host States. This dilemma has already raised questions as to the legitimacy of SOEs being able to access the conventional investment regime and the potential security concerns when they pursue non-commercial policy objectives. Formulating a shared framework for defining SOEs is highly significant for both substantive and procedural issues at national and international levels. The article exposes the inherent grey areas where SOEs are defined by the “effective influence” that home governments wield over enterprises operating overseas, while also convincingly arguing that “ownership” is no longer a suitable criterion to measure state influence. He does not impose a rigid definition, nor propose reactionary solutions to a growing US/EU-China divide but provides criteria through which states can meaningfully express their different perspectives. For this reason, this article contributes to legal discourse on the protection of sovereign investments, while addressing lack of a universal definition of SOEs. Therefore, it addresses a critical gap in international investment law created by the unprecedented rise of State capitalism.

Dilini Pathirana
Faculty of Law
University of Colombo